1. Field of the Invention
This invention relates to electronic payment methods. It relates particularly but not exclusively to methods of making a payment over the Internet, a method of making an electronic payment for the purchase of goods and/or services, a method of an account holder with a financial institution withdrawing cash from an automatic teller machine, a method of authenticating electronic payments and a system for authenticating electronic payments.
2. State of the Art
Presently, credit card payment transactions over the Internet operate under the same framework as mail orders or telephone orders (MOTO). In MOTO transactions, the credit card is not present. There is no way for the merchant to verify the legitimacy of the customer's card or identity before confirming the order. Under the MOTO framework, the merchant carries all the risk for fraudulent credit card use.
In a typical credit card transaction, in addition to the customer and merchant, the parties involved in a credit card transaction include:                (a) The merchant bank: the bank where the merchant account is located;        (b) The acquiring bank: a bank that specializes in managing credit card transactions for merchants. Usually the acquiring bank is the same as the merchant bank but this is not necessarily the case;        (c) The credit card network: the communications network that connects issuing and acquiring banks; built by the card associations such as AMEX®, MASTERCARD® and VISA®; and        (d) The issuing bank: the company that issues the credit card to the customer.        
The basic payment transaction process works in the manner illustrated in FIG. 1:                (1) The customer sends his or her credit card number, name, billing address, and other details of the transaction to the merchant through the Internet.        (2) The merchant forwards the transaction details and card number to the acquiring bank.        (3) The acquiring bank sends the transaction data and the request through the card association network to the issuing bank.        (4) The issuing bank performs a variety of security checks, including available funds and card number validation.        (5) The issuing bank tells the credit card network whether or not the transaction is approved.        (6) The credit card network notifies the acquiring bank.        (7) The acquiring bank notifies the merchant and if approved, the merchant fulfills the order.        (8) At the end of day, the merchant sends a request to the acquiring bank to capture the funds.        (9) The acquiring bank forwards the request through the credit card network to the issuing bank.        (10) Transactions are settled when the issuing bank pays the acquiring bank and the acquiring bank transfers the funds into the merchant bank account (less the bank's fees for servicing the transaction).        (11) The credit card statement shows up in the customer's credit card statement with line-item details of the transaction, including the name of the merchant company as set up with the acquiring bank. The customer pays the issuing bank the balance due at a later time.        
Presently, the credit card is the most favored form of payment for business-to-consumer purchases. However, this is a relatively insecure form of payment and can be repudiated by the consumer, as there are no means of authenticating the identity of the purchaser. Online credit card fraud is common; according to one estimate, online credit card fraud was USD 1 billion in 1999, and it is estimated that online fraud will grow by more than 50% each year.
An object of the present invention is to provide a payment method which is more secure than the current Internet credit card payment method.